BOJ Keeps Door Open to Further Hikes Amid Rising Yield Concerns

Bank of Japan Governor Kazuo Ueda has signalled that the central bank intends to continue raising interest rates, citing accommodative monetary conditions and a desire to carefully scrutinise the cumulative impact on the economy. The BOJ has already raised its policy rate five times, and officials will now consider whether the likelihood of their current economic scenario materialising has increased and whether inflation risks have heightened.

Ueda emphasized that underlying inflation is close to the 2 percent target, and the bank's task is to ensure it stabilises around that level rather than overshooting or slipping back below. The recent rise in long-term Japanese government bond yields, which has pushed the benchmark toward the 3 percent level, is being driven largely by global increases in yields rather than domestic factors specific to Japan.

Ueda also addressed the exchange rate directly, saying that the bank would not focus on FX in isolation or react more strongly than it has previously to currency moves when setting policy. Finance Minister Katayama declined to comment on the benchmark JGB yield's move toward 3 percent specifically, but said Japan is monitoring debt market conditions with an extremely high sense of urgency.